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Grayling Brussels' Brexit Bulletin - 3 March 2017

Brexiters like to say how the EU is on the brink of collapse, that the Euro is on its last legs, and that the UK is merely the first of a whole host of EU countries to jump ship.

This week the Commission published a White Paper on the future of the EU post-Brexit, which put forward five possible scenarios for the EU by 2025. (Grayling's briefing on the issue covers off most of what you need to know on this issue).

Not surprisingly, the "brink of collapse" scenario is not covered in the Commission's White Paper, and indeed all five scenarios put forward are predicated on the assumption that the EU will remain united post-Brexit.

Is this itself a likely scenario?

Much will depend on the outcome of the Brexit negotiations. If the UK is perceived to have had and eaten its metaphorical cake - thereby appearing to prosper outside the EU - it may indeed start a domino effect across Europe.

A President Le Pen would no doubt hold a referendum on France's EU membership as a priority- but she would still have to win it. Given how much the structure of the EU, and its policy priorities (notably agriculture), were, and still are, largely based on the French model, this may be a harder battle for her to fight.

The most likely scenario is for the EU to live to fight another day, stumbling from crisis to crisis, engaged in introspection and navel gazing, as occurred this week - but nonetheless very much not "collapsing".

If you have any suggestions about the Brexit Bulletin or want to find out more about a specific aspect of Brexit, please do let us know. Please visit the Grayling Brussels website and follow us on Twitter @TheEULobby.

The highlights from the UK

Lords introduces amendment to guarantee EU citizens' rights The House of Lords has introduced an amendment, put forward by Labour, to the Government's Brexit Bill asking Ministers to explain how they would protect EU nationals living in the UK within three months of Article 50 being triggered. The bill will now return to the House of Commons which will debate it on 13-14 March. Theresa May had previously stated that the rights of EU nationals would only be guaranteed if UK citizens had their rights protected in the rest of the EU.

After the vote May insisted that the provisional timetable for triggering Article 50 on 15 March would not be affected, despite the rather tight timing.

The UK Department for Exiting the EU responded by saying: “We are disappointed the Lords have chosen to amend a bill that the Commons passed without amendment. The bill has a straightforward purpose — to enact the referendum result and allow the Government to get on with the negotiations."

The Lords will also vote next week on an amendment to give MPs a "meaningful vote" on the outcome of the Brexit negotiations.

The Grayling viewIt is expected that the Lords will refrain from introducing the amendment a second time, should MPs block it in Second Reading, since the Lords can ill-afford a stand off with the Government, given their unelected - and hence slightly precarious - status, and the fact that they could be seen to be delaying Brexit - a cardinal sin, not just in the eyes of Brexiters across the country, but even among the Government. Such a scenario would mean that the Brexit Bill will go through both houses unamended. Although Theresa May claims that the timetable is unaltered for triggering Article 50, this development may delay it by a few weeks, although it should still be triggered some time in March - with or without the Lords' amendment.

BMW to consider UK futureBMW have said an electric version of its Mini may be made outside the UK because of the uncertainty around Brexit. Currently, all but two models of the Mini are made inside the UK. A final decision will be taken later this year. “The result of the EU referendum creates uncertainty for the automotive sector in general and for overseas investors in particular...It’s too early to know the outcome of the negotiations,” said a company spokesperson.

In related news, Nissan has told the UK Government to spend £100 million to attract component suppliers to the country, or it may consider the future of its factory in Sunderland. One of the guarantees offered to the company by the Government was a competitive trading environment post-Brexit.

The Grayling viewNot a surprising move by BMW, and they are probably hoping that the UK Government will approach it and offer them a deal, similar to that offered to Nissan last year. However, in light of Nissan's most recent comments, one wonders whether this deal could still be torn up and ignored, in the worst case scenario.

Johnson: Trade deal unlikely to be agreed in two yearsUK Foreign Secretary Boris Johnson has said that it may not be possible to agree a trade deal with the EU within the two-year negotiations. “Time is [an issue],” he said, adding that EU leaders could “play it long, they have electoral considerations, as everybody knows.”

The British Chambers of Commerce have also published a report saying that if a trade deal cannot be reached within this period, then the negotiations should be extended. “Most firms care little about the exact process for triggering Article 50, but they care a lot about an unexpected VAT hit to their cash flow, sudden changes to regulation, the inability to recruit the right people for the job, or if their products are stopped by customs authorities at the border, said BCC Director General Adam Marshall.

The Grayling viewJohnson's views are not unfounded - agreeing both an exit deal and a trade deal within the two-year window are highly ambitious if not impossible. The UK should not bank on the trade deal being made within this time period.

The highlights from Brussels

European Ombudsman urges appropriate Brexit transparency The European Ombudsman, Emily O'Reilly, has asked the European Commission to set out the arrangements that it plans to put in place to ensure transparency and appropriate stakeholder input during the Brexit negotiations. These should cover the types of information and documents the Commission intends to publish - including the timeline for negotiations and reports on negotiating rounds - and when. The Ombudsman also suggests that the Commission detail how it intends to receive input from stakeholders throughout the process and to make it clear from the outset that this input will normally be published. In her letter to President Juncker, the Ombudsman also notes that many questions about EU citizens' rights may come to her office through the European Network of Ombudsmen. Ms. O'Reilly said she will be encouraging her national and regional counterparts to turn to her office for assistance. The Ombudsman has asked the European Commission to reply to her letter by 30 April 2017.

The Grayling viewThe European Ombudsman’s letter is timely as the EU negotiators are currently discussing access to negotiating documents. Sources close to the negotiations have said that a constant flow of information on the negotiations will be available to the public. It will include information about the outcome of negotiation rounds, some position papers from the European Commission and press materials (factsheets, backgrounds documents etc). The recent EU-US trade negotiations are a good precedent to see how access to Brexit documentation will work. In practice, all documents transferred by EU negotiators to the other negotiating party, in this case the UK, will be made public, but internal preparatory documents will not.

The highlights from Europe

French Parliamentarians set out views on Brexit processOn 15 February the French National Assembly adopted an “Information Report” on the repercussions of Brexit and on the follow-up negotiations.

The report recommends first addressing the divorce question, before discussing the future UK-EU relationship. The financial burden incurred by the United Kingdom should be discussed early on in the negotiations, as well as the question of the status of European citizens living in the UK.

The Report highlights the need to ensure that the interest of the European Union prevails and proposes to reinforce Franco-German bilateral relations, given that these countries will play a more major role in the future EU. The report also insists on the negotiations having a global approach, rather than going sector-by-sector, to avoid giving the UK a competitive advantage over other countries.

On 22 February the French Senate adopted a similar information report, which states that no UK-EU trade talks can take place until the UK agrees its terms for divorce, adding that national parliaments in Europe should also be able to vote on the final Brexit deal. The report says that the UK must not be allowed to leave the EU in a better-off position than it is now, and if necessary a withdrawal without an agreement has to be considered.

The Grayling viewSome strong views expressed by French Parliamentarians, but much will depend on who the new French President will be after the May elections. Depending on whether this will be Macron, Le Pen, or another candidate, they will take note of the Parliamentarians' views a lot, a bit, or not at all. Le Pen, for example, probably fits into the latter category, whilst the former probably applies to Macron.

Ryanair wants to see a Brexit plan from the Government

Ryanair has accused the UK Government of failing to grasp the urgency of striking a deal with the EU, saying it needs a year to plan schedules. The company said it needs to see "a plan", to which the UK Department for Transport responded: “We will work closely with the international aviation community to ensure that this global industry continues to be a major success story for the UK economy.”

The Grayling viewAlthough the Government says it is "inconceivable', there remains the risk that the UK could lose access to the Open Skies agreement with Europe which will disrupt services to the mainland as well as with the US. Moreover, Open Skies falls under the jurisdiction of the European Court of Justice, which Theresa May has said the UK will leave post-Brexit. Another conundrum for the UK Government to not only consider, but for which it must also come up with a viable solution.

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